ROYAL HOLLOWAY, UNIVERSITY OF LONDON
StrategyPaper
Choon Peng Ng
Eunsoo Moon
Sebastien
Tawnya Cheatheam
Vijyendra Niranjan
Yumin Huang
1/12/2009
This academic paper applies concepts of Business Strategy to the situation of Hyundai Motor
Company and analyses the strategic implications of its new Fuel Cell car with specific reference to
the South Korean market. The paper also offers some suggestions with explanations of what strategy
Hyundai should employ.
TABLE OF CONTENTS
Introduction ............................................................................................................................... 3
Product Concept ........................................................................................................................ 4
Strategy Analysis ........................................................................................................................ 5
PEST Analysis .......................................................................................................................... 5
A Five Forces Analysis ............................................................................................................ 6
Recommendations and Justifications ........................................................................................ 8
Target Market ........................................................................................................................ 8
Timing..................................................................................................................................... 8
Expansion ............................................................................................................................... 8
Type of Car ............................................................................................................................. 9
Pricing strategy ...................................................................................................................... 9
Sales and Numbers ................................................................................................................ 9
How to get fuel ...................................................................................................................... 9
Promotions and Marketing .................................................................................................. 10
Conclusion ................................................................................................................................ 11
Appendix 1 - References .......................................................................................................... 12
Appendix 2 – Bibliography ....................................................................................................... 14
Appendix 3 – Assessment ........................................................................................................ 15
International Business Strategy – Hyundai / Korea
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Introduction
For corporations all over the world, 2008 has been a tough year to go through and
predictions for 2009 are worse. With the financial crisis, business’ tends to cut down prices
and consumers look for even cheaper goods. However, besides this vital change, keeping
sustainability of the organization is very important as well. Green customers and
environmental friendly products play an important role in the department (Financial Times,
2008). Moreover, the instable oil price influences the world every day. This applies
particularly to the car industry where there has been a changing trend to buy cars that give
more mileage.
Car companies are eager to keep launching new more green products after the huge success
of Toyota’s Prius which was pretty soon followed by majority of the car-makers announcing
some or other form of green car initiative. However, there are criteria should be considered
in launching a new product in the business world and this report would look into one of
those manufacturers.
This report will analyze the strategic situations of Hyundai’s fuel cell car with respect to the
dynamics of South Korean market. The report will consider multiple aspects of Strategy and
will make some recommendations.
International Business Strategy – Hyundai / Korea
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Product Concept
The core concept of Hyundai fuel cell car is focus on sustainability and climate protection
and to fulfil the market demand (Schaefer, 2007). For the South Korean (Korean) market,
the latest model of fuel cell car- Hyundai I-Blue represents this comprehensive requirement
of reducing the carbon footprint. Introduced in 2007 Frankfurt, the image of I-Blue is not
only environmental friendly product, but with other competitive advantages in the market.
(Hydrogen Cars, 2007). Four salient features of the I-Blue are as follows:

Powered by a fuel cell battery, I- Blue is the third generation of fuel cell model in
Hyundai. With the development in R&D, I-Blue can run more than 600 km per refuelling
and achieves a maximum speed of 165 km per hour.
(source: Hyundai, 2007 News)

Based on sports tour car style, Hyundai adds more state of the art human machine
elements in it. I- Blue present a new 2+2 cross-over body type which can let the
consumers have a glimpse into the future of automobiles.

The fashionable design mixed with the philosophy of Ying and Yang. By turning the
Chinese religion concept into the look of I- Blue, the square and the circle integrated on
I- Blue make it a distinct look.
(source: Hyundai, 2007 News)

The balance between High-Tech and passenger comfort and safety can be found in IBlue. I-Blue provides a relaxing stretched-out seating position for the driver and
passengers. Safety has also received great attention with the driver being easily able to
perceive outside environment through the full screen with the 3D vision heads-up
display.
The concept of I-Blue model is the beginning to the future generation of automobiles as well
as changing the fundamentals of the industry. With the help of electrical engine, drivers can
enjoy their journey noiselessly as though enjoying a no-stress, holiday drive feeling
(Hyundai, 2007).
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Strategy Analysis
This section would analyze the strategy of Hyundai with particular regards to the Korean
market and would briefly consider two strategic models – the PEST framework and the Five
Forces by Michael Porter. The choice of two frameworks would help in covering as much
ground as possible.
PEST Analysis
To analyze the effects of the external environment, it would be prudent to go into the PEST
analysis.
Political: With the Korean President announcing that from 2008, government will use ‘green
growth’ plan which is designed to use 22 new engine technologies (Kim, 2008), which
includes Fuel Cell. Considering the high levels of automobile pollution, the government aims
to combat this by introducing more green technology and especially by incentivising the
building up of more hydrogen-refuelling stations. With Hyundai also being a member of
California Fuel Cell Partnership programme, it gets even more incentive and technology to
go the fuel-cell way.
Economic: Korean economy is 97% dependent of foreign imports for energy and per capita
energy consumption has already crossed that of Japan and Germany (Lee, 2008). With
prices of conventional fuels rocketing, the government is looking for ‘green plan’ to reduce
the traditional technologies with new ones, thereby also increasing jobs of about 150,000 by
about 2018 and reducing 8% of petroleum consumption by then (Kim, 2008). It is common
knowledge that eco-friendly transportation would be the driving force of the economy and
thus Hyundai’s plans to go that way. It started in 1991 with producing Sonata electric cars,
started hybrid production in 1995 and plans to mass produce hybrids by 2009, increasing
production eventually to 3,000,000 by 2015 (Hyundai Company, 2007).
Social: The Korean society has a traditional patriarch way of performing business expressed
by obedience and personal loyalty (Biggary and Guillen, 1999). Hyundai is owned by this
family system and in a need to survive, it must change and bring in elements of meritocracy
and this change is being reflected in its strive for greener cars.
Technology: The Ministry of Education, Science, and Technology (MEST) and the Ministry of
Knowledge Economy (MKE) are the key players involving in Korea’s fuel cell Research and
Development (R&D) project since 2004 (Lee, 2008). After two years, they launched two
aggressive monitoring projects for fuel cell vehicles so that they can promote the hydrogen
infrastructure by validating and demonstrating for fuel cell cars and hydrogen refuelling
stations at the same time. Accordingly, due to the technology supports by government,
Hyundai will have fuel cell cars road tests in 2009 which is earlier than many car companies,
like Ford and Toyota.
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A Five Forces Analysis
Analyzing the strengths and weaknesses of an industry by using Porter’s Five Forces model
determines the industry attractiveness and the likelihood of achieving profitability (de Wit &
Meyer, 1998). While there have been criticisms of the model, namely that it is static, a
‘snap shot’ in time, and does not give weight to any of the five areas, it is still a useful tool in
determining the ability of a firm to achieve a competitive advantage within a given industry
by pinpointing key success factors.
(Source: The Five Competitive Forces That Shape Strategy, Michael E. Porter, 2008)
The application of Porter’s Five forces is given below:
Threat of New Entry
Auto manufacturing is highly capital and labour intensive, so threat of new entry is low.
Established in 1947, Hyundai enjoys a learning curve based on over fifty years experience
(Hyundai, 2008) and is now the world’s 6th largest automobile manufacturer. It also has the
benefit of economies of scale through the operation of the world’s largest assembly plant in
Ulsan, Korea (Hyundai, 2008). Hyundai, along with subsidiary Kia, dominates the domestic
market, accounting for 70% of all vehicles sold (Korea Automobile Manufacturers
Association (KAMA), 2008).
Power of Buyers
With relatively few fueling stations and several substitute products in the form of traditional
gasoline-powered cars and public transportation, the power of buyers is considerably high.
According to the International Road Federation (IRF) (2007, as cited in the Korea Times,
2007), Korea ranks 40th in car ownership among OECD countries, with 319 vehicles per 1000
International Business Strategy – Hyundai / Korea
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people. This appears low when compared with the US ranking of 5th (675 vehicles per
1000) and Japan at 11th (586 vehicles per 1000). The IRF forecasts 500 vehicles/1000
people over the next few years if the economy continues to grow (IRF, 2007, as cited in the
Korea Times, 2007). Although there are substitutes and high switching costs, the fuel cell
vehicle is unique and therefore has some differentiation advantage.
Power of Suppliers
Being fragmented and quite dependent on the large manufacturer, Hyundai’s many
suppliers have little power. Their 400 1st tier, 2500 2nd tier, and innumerable 3rd tier
suppliers have neither the brand identity nor the capital or R&D ability to threaten forward
integration (Duplaga et al., 2000). Additionally, the fuel cell technology is created in-house,
so Hyundai has little to no switching costs, giving them the upper hand with suppliers.
Hyundai also has the leveraging power of their massive manufacturing centre in Ulsan,
which capitalizes on its size to maximize economies of scale.
Threat of Substitutes
With an extensive and affordable public transportation system and high levels of vehicle
ownership, the threat of substitutes is considerably high. However, high oil demand, along
with rapid growth and urbanization will continue to push oil prices ever higher (Asian
Development Bank, 2008). Being the 9th largest oil consumer (Energy Information
Administration, 2007) and one of the highest taxed oil countries in Asia will make an
alternative fuel highly attractive to many in Korea.
Rivalry
With 8 of the top 10 best selling cars of 2007 (KAMA, 2008), Hyundai dominates the Korean
automobile market and has low domestic rivalry. Hybrid imports, with the Toyota Prius
expecting to be released in 2009 (Chosun Ilbo, 2008) and Honda planning to double the
sales of their Civic Hybrid in 2008, pose a serious rivalry threat. In answer, Hyundai plans to
commercialize their Avante hybrid for 2009 (Chosun Ilbo, 2008). This lays the ground work
to build strong loyalty for Hyundai’s alternative fuel division and keep foreign rivals at bay.
Based on the Five Forces and the PEST framework, there are multiple recommendations and
action points that can be derived for Hyundai with respect to the Korean market and plans
for expansion that can be considered. They are highlighted in the next section.
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Recommendations and Justifications
Based on the PEST and Five Forces analysis, there are multiple issues that Hyundai Motor
Company can look into. Some of the recommendations along with their justifications are
detailed below:
Target Market
During initial stage, Hyundai should focus on the Korean market before any overseas
expansion. The primary customers to be targeted should be from young generation and / or
having a small family. In recent years, car ownership among young population in Korea has
been changing from a basic way of livelihood to a more convenient way of enjoyable
lifestyle.
The increase in Korea’s GDP and introduction of the system of 5-working days indirectly
impacts its local automobile industry. Generally, working people’s spare time is increased by
approximately 23.6% and this boosts interest in sports and leisure among Koreans (Ministry
of Commerce, Industry and Energy 2004). This has driven young people to buying a car for
spending their leisure time more conveniently.
In addition, the increasing environmental awareness among Koreans on the severe hazard
of global warming and the harmful effects of emission could potentially trigger their
preference for green products. Besides, the young generation is generally more willing to try
out new technology as has been seen in the case of youngsters continuously upgrading their
mobile phones.
Timing
A good estimated timing for launch would be about early 2011. There would be a
requirement of pre-entry preparation and by that time, it is widely estimated that the
economic upswing would begin fuelling demand.
Gaining customer’s confidence and setting up fuel supply, mechanic training and
collaboration with government and fuel providers should be carried on along with
perfecting the design and development of the vehicle.
Expansion
After about three years of focus on domestic market, Hyundai should expand to other Asian
countries particularly China, India, Taiwan and other Southeast Asian countries by about
2014. The growing population of middle-class in these countries will provide plenty of longterm economic potentials. Unlike Japan, lack of a strong dominant local automobile brand
makes foreign manufacturers in these countries would make these markets easier to
penetrate. However, collaboration with local governments on the refuelling facilities would
have to be done in advance before entry.
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Type of Car
Increasing number of nuclear family would lead to an increasing demand of small cars. With
young people as the major customers, small cars would be most appropriate for them,
especially considering their financial position.
Pricing strategy
A low price strategy considering the young generation customer base is ideal. However, the
car should be an aspiration and thus the price should be higher than conventional fuel
similar specification cars. The pricing has to reflect a profit motive and a high aspiration
value for the car.
The pricing has to thus reflect the “upwardly mobile” class of individuals, who are not as
wealthy as their parents would be at that time. However, the price should be lower than
large sized cars.
The strategy to continuously innovate (ex. Launch a new model every year with incremental
innovations) and to make it more environment friendly with each model would be a good
approach. After gaining a critical mass of satisfied customers, pricing could be changed to
derive profits or could be kept the same and with low costs from experience (learning and
scale), more profits would ensue.
Sales and Numbers
There were 2000 units of monthly sales of i30 model in 2007 (Hyundai Motor Company
2008 Sustainability Report). This can be taken as the reference in setting sales target since
the fuel cell model is within same category of i30 model. Moreover, the significant impacts
of the recent economic crisis should not be under-estimated in setting up targets.
Thus, a relatively moderate annual sales target of 10,000-12,000 units for first few years
would be appropriate. This should then be expanded with increasing customer confidence
and along with the competitor’s moves.
How to get fuel
Prior to the official launch in 2011, negotiations with government and big Hydrogen
suppliers (like Air Product) should be on to set up a minimum of 10 refuelling stations in a
city (ex. Seoul, Kyounggi) where the car is proposed to be sold. Commitment and long term
strategy would have to be demonstrated along with contingency plans to secure the supply
of fuel; else the entire project could become worthless.
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Air Product has already installed several Hydrogen fuelling stations in Seoul in 2007 as part
of R&D demonstrations. According to K.S. Koh, global applications and development
manager for Air Products Korea,
“We commend the Korean government’s commitment to furthering the use of hydrogen for
fuelling automobiles. Globally, we have placed more Air Product fuelling equipment in Korea
than any country outsides of the US.”
Providing such well-equipped environment convincingly shows the readiness of promoting
fuel cell product to the public. Consumers will then have peace of mind without worrying
about the insufficient fuel cell services, which is an important part of the car.
Promotions and Marketing
Environment consciousness development and advertising needs to go hand in hand for this
type of car. There could be multi levels of advertising and promotions campaign detail the
ill-effects of greenhouse gasses and the negative effects it has on the planet. Realization of
how this car would help save the disaster with each trip would be a good strategy to look
into. Publicity of Hyundai brand as an environmentally responsible company also needs to
go hand in hand with this campaign so that people are drawn towards it and not to another
rival.
A second form of promotion could be live demonstrations with multiple of cars (painted in
sharp colours) are visible of the streets. The ease of driving these cars, the ease of refuelling and the ‘fill it, shut it, forget it’ type of branding could be a plus as consumers start
getting more aware of Hyundai’s offering in this segment. Promotions could also be in the
form of quizzes, campaigns, gifts, etc. in the form of generating awareness, especially in
college and young business environment.
Sales promotion would also play a fundamental role. Since our official launch would be
proposed to happen in early 2011, there should be pre-launch promotions in conjunction
with Christmas and Thanksgiving festivals at the end of 2010. Discounted price, extended
warranty period, free refuelling vouchers and car accessories will be offered upon making
purchasing orders during this promotion campaign.
A plethora of incentives would thus be a good position to take. Since this would be a new
car and a new concept, people would have to be actively promoted to take part in a green
campaign which would also go with their aspired lifestyle.
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Conclusion
Based in South Korea, Hyundai is well poised to employ its strengths in developing a new
fuel cell based car. Current technology and mindset is towards development of more fuelefficient and greener cars. Being one of the leaders in this technology will also help it
expand into other profitable markets. It can also use the Korean experience to make more
significant inroads into other world markets, not only the developed ones but also the
developing ones.
Emerging a leader in the fuel cell business could transcend the company to a position of
dominance if it can get it right, the first time and this could help it reap significant profits
later on. The automobile industry is changing, and changing fast. It is entering a phase were
every cost would need to be justified (buying, fuel, maintenance, etc) and compared (with
trains for example). In this regards, a good strategic positioning from Hyundai evolving from
its home turf – South Korea, would make good business sense.
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Appendix 1 - References

Asian Development Bank, 2008, Reasons to be nervous: commodity prices and The Chosun
Ilbo (2008, March 24), ‘Korea’s auto market turning green’, (Digital Chosun Ilbo – English
Edition) Available:
http://english.chosun.com/w21data/html/news/200803/200803240010.html, Accessed:
2008, December 18

Biggart, N.W. and Guillen, M.F., 1999, Developing Difference: Social Organization and The
Rise of The Auto Industries Of South Korea, Taiwan, Spain, and Argentina, American
Sociological Review, 64, pp722-747.

De Wit, B., & Meyer, R., 1998, Strategy - Process, Content, Context: An International
Perspective, 2nd ed. London: International Thompson Business Press.

Duplaga, E., Hahn, C., & Hartley, J., 2000, Supply-chain synchronization:
hyundai motor company, Interfaces, 30 (July-August): 32-45.

Energy Information Administration, 2007, South Korea oil overview (Energy Information
Administration - official energy statistics from the US government), Available:
http://www.eia.doe.gov/cabs/South_Korea/Oil.html, Accessed: 2008, December 18

Financial Times Special Report, 9 Oct 2008, Staying on course in a tougher climate.

Hawkins, S. and Hughes, N., 2005, Technological Characterisation of Hydrogen Fuel Cell
Vehicles, UK SHEC, 22.

Hydrogen
Cars,
2007,
Hyundai
I-Blue,
Available
http://www.hydrogencarsnow.com/hyundai-i-blue.htm, Accessed: 2008, December 23

Hyundai Motor Company, 2008, Sustainability Report The Road to Sustainability

Hyundai
Motors,
2008,
About
Hyundai
(Hyundai
Motors),
http://www.hyundai.co.uk/aboutHyundai/past/, Accessed: 2008, December 18

Hyundai Company, 2007, Hyundai Planning LPG Hybrid Avante in Korea for 2009, Hyundai
company.

Hyundai, 2007, September 11,
2007 news, available: http://worldwide.hyundaimotor.com/common/html/about/news_event/press_read_2007_22.html,
Accessed:
2008,December 23

Kim, H,C., 2008, ‘Green Energy’ is Key to Growth, Korea Times.

Kim, T., 2007, Development and Exploitation in Korea – the way to Commercialisation,
presented at the 10th Grove Fuel Cell Symposium
International Business Strategy – Hyundai / Korea
lessons from
at
Available:
12

Korea Automobile Manufacturers Association, 2008, Member companies: Hyundai, Korea
Automobile
Manufacturers
Association,
Available:
http://kama.melita.co.kr/eng/MC/K_eng_mc1.jsp, Accessed: 2008, December 18

Lee, T.H., 2008, Hydrogen and Fuel Cell Activities in Korea, Korean Economic Institute Policy
Forum.

Lee, M.K.,2001, Overview of Energy Subsidies and a Reform Plan of Energy Tax System in
South Korea, UNEP Collaborating Centre on Energy and Environment.

Ministry of Commerce, Industry and Energy, 2004, Development strategy of sports and
leisure textile Industry

Natural Gas Association Vehicles, 2007, NGV Country Report (2007), South Korea, NGVI.

Porter, Michael E., 2008, The Five Competitive Forces That Shape Strategy, Jan 2008, Harvard
Business Review

Schaefer, P. , 2007, September 01, ‘Hyundai to Unveil Fuel Cell Electric Vehicle’,
Environmental News Network, available: http://www.enn.com/top_stories/article/22588,
Accessed: 2008, December 23

The Korea Times, 2007, December 14, Korea ranks 40th in car ownership.’, The Chosun Ilbo
(English
Newspaper),
Available:
http://www.koreatimes.co.kr/www/news/biz/2008/09/%20%20123_15561.html, Accessed:
2008, December 18

http://www.airproducts.com/PressRoom/CompanyNews/Archived/2007/06Nov2007.htm
International Business Strategy – Hyundai / Korea
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Appendix 2 – Bibliography

McGee, J., Thomas, H., & Wilson, D. (2005). Strategy: Analysis ad Practice. McGraw Hill.

Segal-Horn, S. & Faulkner, D. (1999). The Dynamics of International Strategy. Thomson
Learning.

Segal-Horn, S. (1998). The Strategy Reader. Blackwell.

De Wit , R. & Meyer, R. (2004). Strategy: Process, Content, and Context. Thomson.

Mellahi, K. et al (2005). Global Strategic Management. Oxford University Press.
Websites: (accessed multiple times during Oct, Nov, Dec, 2008 and Jan 2009)

Fuel Cell Organizations available at
http://www.business.com/directory/energy_and_environment/alternative_energy/hydroge
n_and_fuel_cells/organizations/

Fuel Cell Today available at http://www.fuelcelltoday.com/

The Online Fuel Cell Information Source available at http://www.fuelcells.org/

California Fuel Cell Partnership available at http://www.cafcp.org/

Fuel Cell Vehicles from US government available at
http://www.fueleconomy.gov/feg/fuelcell.shtml

European Commission Energy Research available at
http://ec.europa.eu/research/energy/nn/nn_rt/nn_rt_hlg/article_1261_en.htm

EV World available at http://www.evworld.com/
International Business Strategy – Hyundai / Korea
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Appendix 3 – Assessment
The module will be assessed through one piece of coursework (20% weighting) and an unseen threehour essay-based examination (80%). The coursework will comprise of self-managed groups of 4 or 5
devising and presenting an outline strategic plan for a fuel cell based car. The context can be
commercial, non-profit, government agency or any other. The plan may be devised around an actual
prototype but must not simply replicate an existing plan: it must be original. You can take the
perspective of an existing player in the car sector or that of a newcomer. This brief is deliberately
broad to encourage creativity but realism is essential. Marks will be awarded for the plausibility of
the plan, for creativity, for presentation skill, for research and for the correct use of strategic
concepts. The group report is limited to a maximum of 3,000 words. Ideas should, therefore be
presented succinctly and professionally in an executive style. The report does not have to adhere to
precise report conventions. It must have a title, a beginning, middle and an end. It can have
appendices. It should contain the essential elements of a strategic plan at the product/market level
i.e. it should explain




What is going to be the firm’s competitive/corporate strategy?
What is the product/service concept and what consumer benefits does it address?
What are the main decisions regarding the corporate/business strategy and positioning?
How are these decisions justified?
To get you started, you will find two articles on fuel cell technology in your study pack. Some
additional references are given below but please be aware that one of the objectives of the group
work is to encourage you to develop the skills of informational retrieval and analysis. Therefore you
should not expect the list of additional readings below to be a complete list – you should find some
relevant articles independently.
Deadline: The group report should be handed in by 12.00 noon Friday 16th January 2009.
Additional readings (only to get you started):
 Price Waterhouse Coopers (2003)
 Cropper et al (2003)
 Walsh et al (2002)
International Business Strategy – Hyundai / Korea
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